CPI Alfa, a.s. HALF-YEAR REPORT (unaudited)

Transcription

1 ; CPI Alfa, a.s. HALF-YEAR REPORT 2016 (unaudited)

2 Half Year Report 2016 KEY FIGURES CPI Alfa, a.s. in numbers the first half of ,190 Gross rental income 393,136 (in thousands of CZK) Investment property (in thousands of CZK) 60,058 Equity (in thousands of CZK) 100% Occupancy rate 13,399 Operating profit (in thousands of CZK) 10,930 Total leasable area (in sqm) 396,863 Total assets (in thousands of CZK) 1

3 Half-Year Report CONTENTS Key Figures... 1 Person Responsible for the half-year Report A Cut above CPI Alfa... 4 Message from the Board of Directors of CPI Alfa... 5 Our Portfolio... 6 CPI RETAIL... 6 Report on CPI Alfa Company CPI Alfa Economic Development in the Czech Republic Retail Market in the Czech Republic Property Valuation Earnings and Balance Sheet Analysis Financing Information on Equity Outlook Financial Statements

4 Half-Year Report PERSON RESPONSIBLE FOR THE HALF-YEAR REPORT 2016 Statutory Declaration With the use of all reasonable care and to the best of our knowledge, the half-year report 2016 provides a true and fair view of the financial situation, business activities, and results of operations of the company CPI Alfa, a.s. for the six month period ended 30 June 2016, and of the outlook for the future development of the financial situation, business activities, and results of operations of the company CPI Alfa, a.s. No facts have been omitted that could change the meaning of this report. Prague, 29 September 2016 Zdeněk Havelka Member of the Board of Directors CPI Alfa, a.s. 3

5 Half-Year Report A CUT ABOVE CPI ALFA The company CPI Alfa, a.s. (hereinafter also as CPI Alfa or the Company ) was incorporated on 21 March 2012 and as of 1 October 2012 acquired properties from the company TREI Real Estate Czech Republic s.r.o. These properties are leased to retail chains Penny Market and Billa on the basis of 10 years lease agreements and are located in cities Dobříš, Holešov, Holice, Jablonec nad Nisou, Liberec, Říčany, Semily, Tanvald and Turnov. In June 2014 CPI Alfa became a part of CPI PROPERTY GROUP (hereafter the Group ). The Group is a Luxembourg based société anonyme, founded in 2004 as ORCO Germany S.A. Since its foundation it has been operating in Germany and concentrated mainly on commercial property, project development and asset management especially in Berlin. With its subsidiary Gewerbesiedlungs-Gesellschaft (GSG), the Group is the largest lessor of commercial property in the Berlin area. The Group has focused on investment properties, realizes development potentials and offers full-service asset management for third parties. The Group owns and manages over 716,000 sqm of retail space, about 1,332,000 sqm of existing office space, 35 hotels with 11,911 beds and about 272,000 sqm of space intended for light industry and storage. With over 12,400 apartments, it is the second largest provider of rental housing in the Czech Republic. 4

6 Half-Year Report MESSAGE FROM THE BOARD OF DIRECTORS OF CPI ALFA During the first half of the year 2016 the company CPI Alfa, a.s. was not subject to any significant change, which corresponds to the strategy of the company. The company CPI Alfa, a.s. was incorporated in 2012 as a SPV that acquired 9 properties of supermarkets and its strategy is to operate this stable portfolio of real estate. Also in future CPI Alfa is not supposed to be influenced by any substantial change due to long term contracts concluded with the retail chains Penny Market and Billa. In October 2012, CPI Alfa issued Czech crowns project bonds with a total nominal value of CZK 279 million, with a fixed interest of 5.5% p.a., that are due in These project bonds are secured by the real estate portfolio of CPI Alfa, a.s. and its purpose was to finance the acquisition of this portfolio. All activities such as facility and property management, asset management, tax and accounting management, financial management and strategic management are provided by the service companies of the Group. CPI Alfa as of 30 June 2016 achieved net profit in the amount of TCZK 2,184 with gross rental income amounting TCZK 18,190. Prague, 29 September 2016 Zdeněk Havelka Member of the Board of Directors CPI Alfa, a.s. 5

7 Half-Year Report OUR PORTFOLIO CPI RETAIL CPI Alfa owns the following real estate portfolio in the Czech Republic: Supermarket City Street Penny Market Dobříš Za Pivovarem 1656 Penny Market Holešov Palackého 730/82 Penny Market Holice Hradecká 1122 Penny Market Jablonec nad Nisou Ivana Olbrachta 4582/8 Penny Market Liberec Na Žižkově 973/10 Penny Market Říčany Pod Lihovarem 2055/4 Penny Market Semily Jana Nerudy 393 Penny Market Turnov Sobotecká 2078 Billa Tanvald Krkonošská 640 6

8 Half-Year Report Penny Market Dobříš Tenant: Leasable area: Penny Market s.r.o. 1,154 sqm Occupancy: 100% End of lease: 30 April 2025 Penny Market Holešov Tenant: Leasable area: Penny Market s.r.o. 1,184 sqm Occupancy: 100% End of lease: 31 December 2024 Penny Market Holice Tenant: Leasable area: Penny Market s.r.o. 1,170 sqm Occupancy: 100% End of lease: 31 December

9 Half-Year Report Penny Market Jablonec nad Nisou Tenant: Leasable area: Penny Market s.r.o. 1,202 sqm Occupancy: 100% End of lease: 30 April 2023 Penny Market Liberec Tenant: Leasable area: Penny Market s.r.o. 1,174 sqm Occupancy: 100% End of lease: 30 April 2023 Penny Market Říčany Tenant: Leasable area: Penny Market s.r.o. 1,172 sqm Occupancy: 100% End of lease: 30 April

10 Half-Year Report Penny Market Semily Tenant: Leasable area: Penny Market s.r.o. 1,557 sqm Occupancy: 100% End of lease: 31 December 2024 Penny Market Turnov Tenant: Leasable area: Penny Market s.r.o. 1,141 sqm Occupancy: 100% End of lease: 30 April 2023 Billa Tanvald Tenant: Leasable area: BILLA, spol. s r.o. 1,176 sqm Occupancy: 100% End of lease: 30 April

11 Half-Year Report REPORT ON CPI ALFA Company CPI Alfa CPI Alfa, a.s., with its registered office at Prague 1, Vladislavova 1390/17, Nové Město, Postal Code , Company Identification Number , was established on 21 March 2012 for an indefinite period of time. It carries out its activities in accordance with Czech law, under the Act No. 90/2012 Coll., on commercial companies and cooperatives. According to the Article 4 of the Articles of Incorporation of CPI Alfa valid as of 31 December 2014, the subject of business is: Rental of properties, residential and non- residential premises. CPI Alfa was registered in the Commercial Register kept by the Municipal Court in Prague, Section B, File Documents are filed in the collection of documents and in the registered office of the Company. Contact details CPI Alfa, a.s. Vladislavova 1390/17 Nové Město Prague 1 tel.: , fax: , cpi@cpi.cz, The parent company of CPI Alfa is the company Czech Property Investments, a.s., with its registered office at Prague 1, Vladislavova 1390/17, postcode , Company Identification Number that prepares consolidated financial statements and consolidated annual report in accordance with the International Financial Reporting Standards (IFRS) and the International Accounting Standards (IAS) as adopted by the European Union. CPI Alfa is not dependent upon other entities within CPI PROPERTY GROUP. Management As at 30 June 2016 members of Board of Directors are Zdeněk Havelka (since 21 March 2012) and Martin Němeček (since 25 September 2012). Member of Supervisory Board is Milan Trněný (since 28 January 2014). 10

12 Half-Year Report Economic Development in the Czech Republic The following reviews on macroeconomic data were published by the Czech Statistical Office (unless otherwise stated). According to the preliminary estimate, the gross domestic product increased in the Q by 2.5%, y-o-y; compared to the Q it was 0.9% up. In the Q2 2016, growth of the Czech economy still belonged to the highest in the European Union. According to the preliminary estimate, the gross domestic product (GDP) adjusted for price effects and seasonally adjusted increased in the Q by 2.5%, y-o-y; compared to the Q it increased by 0.9%. In terms of the y-o-y comparison, in June, the consumer prices increased by 0.1%. The biggest influence on the growth of the y-o-y price level in June came from prices in alcoholic beverages and tobacco due to the increase in prices of tobacco products and alcoholic beverages (5.1% and 2.5%, respectively). An influence had prices in housing, water, electricity, gas and other fuels, where prices of the net actual rentals increased by 1.5%, water supply by 1.6%, sewage collection by 5.3%, electricity by 1.2%, heat and hot water by 0.9%. In clothing and footwear, prices of garments were higher by 0.4% and prices of shoes and other footwear by 5.2%. In recreation and culture, prices of recreational and cultural services went up by 2.1%. In restaurants and hotels, prices of catering services were higher by 1.3%, while prices of accommodation services remained unchanged. In miscellaneous goods and services, prices of hairdressing salons and services of personal care were higher by 2.2% and financial services by 2.1%. The increase in the average consumer price index in the twelve months to H compared with the average consumer prices index in the previous twelve months, amounted to 0.3% in June. The general unemployment rate of the aged years (the share of the unemployed in the labour force, that is in the total number of the employed and the unemployed, as percentage), seasonally adjusted, reached 4.2% in H and decreased by 0.9%, y-o-y. The male unemployment rate, seasonally adjusted, attained 3.6%; the female unemployment rate was 5.0%. Retail Market in the Czech Republic No shopping centre was completed in the H1 2016, however one shopping centre, or more precisely the second phase of an existing scheme, started construction. IGY in Česke Budějovice will offer 9,000 sqm of new modern retail space in Currently there are five shopping centres under construction with the total volume reaching 100,000 sqm. Aupark in Hradec Králové and Galerie Přerov should be opened by the end of 2016 and the expansion of Centrum Chodov, Central Jablonec nad Nisou and IGY České Budějovice in The volume of total shopping centre stock remained the same by the end of the H and amounted to 2.3 million sqm. The density of the shopping space was 215 sqm/ 1,000 inhabitants which ranked the Czech Republic in 3rd place within the CE region. The Czech Republic remains a market with the majority of the retail demand concentrated on Prague. Currently prime shopping centre rents remained at EUR 115 /sqm/ month in Prague and EUR 65 /sqm/ month in the regions. High street supply remained increasingly limited and demand is much higher than supply. The prime rent increased to EUR 205 /sqm/ month on the high street. Property Valuation The condensed interim financial statements of CPI Alfa as of 30 June 2016 were prepared in accordance with International Financial Reporting Standards (IFRS), which include the application of the fair value method. Since the Investment properties owned by CPI Alfa must be stated at fair value (present value), the regular valuation of these properties by independent experts is recommended. The property portfolio valuation is based on a report issued by DTZ, a UGL company (further DTZ ) as at 31 December

13 Half-Year Report Earnings and Balance Sheet Analysis For the period from 1 January 2016 till 30 June 2016, CPI Alfa achieved a profit in the amount of TCZK 2,184. Chart 1 Structure of Profit for the period ended 30 June 2016 (in TCZK) Total assets amounted to TCZK 396,863 as of 30 June The largest share of the total asset is represented by investment property amounting TCZK 393,136. The largest share of total liabilities is represented by issued bonds in the total amount of TCZK 280,223. Chart 2 Structure of Assets as of 30 June 2016 (in TCZK) 12

14 Half-Year Report Chart 3 Structure of Equity and Liabilities as of 30 June 2016 (in TCZK) Financing Data on Bonds CPI Alfa issued following bonds: ISIN CZ Date of Issue 26 October 2012 Maturity Date 26 October 2017 Nominal Value of 1 Bond CZK 1.00 Number of Issued Bonds 279,000,000 Total Nominal Value CZK 279,000, Interest Rate 5.5% pa Security Kind owner/bearer Security Form dematerialized Interests Payment quarterly retrospectively always by 26 January, 26 April, 26 July and 26 October Prospectus Approval decision of the Czech National Bank Ref. No. 2012/10125/570 of 22 October 2012 which came into force on 22 October 2012 Market Prague Stock Exchange, Corporate sector Market 13

15 Half-Year Report Information on Equity Data on Shares Shares of CPI Alfa, a.s. are common shares in the form of paper certificates, issued to the bearer, the nominal value is CZK 100,000 per share. The total nominal value of the issue is CZK 2,000,000. Income from the shares is taxed according to the Act No. 586/1992 Coll., on Income Tax, as amended. The tax is applied as a deduction on the dividend payment. Shares of CPI Alfa are pledged in favor of the company Raiffeisenbank a.s. as a security of the issued bonds. Changes in the owner of the paper shares are made by their handover and endorsement in accordance with the Securities Act. The share owner does not have any exchange or first option right and the shares do not have limited voting rights or any other special rights. During the shareholder voting at the General Meeting, each share represents one vote. Dividend payments are made by the Board of Directors of CPI Alfa in accordance with the decision of the General Meeting which determines the place and date of dividend payments. The latest date of dividend payment is the date designated as the reference date for the eligibility to participate in the General Meeting. The latest date of dividend payment is the date designated as the reference date for the dividend payment. Unless the General Meeting decides otherwise, the dividend is payable within one year of the date on which the General Meeting decided on profit distribution. After dissolution of CPI through liquidation, each shareholder is entitled to a share in the liquidation balance. Shares of CPI Alfa are not traded on any public or regulated domestic or foreign market. Data on Share Capital The share capital of CPI Alfa is CZK 2,000,000 and it is divided into 20 shares with a nominal value of CZK 100,000 per share. The share capital of CPI Alfa has been paid in full and it is not subject to any option or exchange rights. CPI Alfa is not a direct holder of any of its own participating securities. Shareholder structure of CPI ALFA as of 30 June 2016: Shareholder Share in share capital Czech Property Investments, a.s % Total % CPI Alfa is not aware of any information about agreements between the shareholders that may make the transferability of shares or voting rights more difficult. Data on Equity The value of equity as of 30 June 2016 is TCZK 60,058 and it consists of: share capital (TCZK 2,000), capital funds (TCZK 25,000), and accumulated profit (TCZK 33,058). 14

16 Half-Year Report Outlook As a SPV, CPI Alfa has been incorporated for acquisition, holding and renting of its own properties. In the following years, the business activities of CPI Alfa will concentrate on maintaining of full valuable relations with its tenants and on proper facility and property management. This aim shall ensure sufficient income for covering of its liabilities and for creating of a required profit. Similarly to the current year, the Company does not plan any major capital expenditures. Prague, 29 September 2016 Zdeněk Havelka Member of the Board of Directors CPI Alfa, a.s. 15

17 Half-Year Report FINANCIAL STATEMENTS Condensed Interim Financial Statements as of 30 June 2016 Statement of financial position Statement of comprehensive income Statement of cash flows Statement of changes in equity Notes to the Condensed Interim Financial Statement 16

18 Condensed interim financial statements as at 30 June 2016 CPI Alfa, a.s.

19 Condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) Statement of financial position ASSETS Non-current assets Note 30 June December 2015 Investment property Total non-current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS EQUITY Share capital Other reserves Retained earnings Total equity LIABILITIES Non-current liabilities Interest-bearing loans and borrowings Bonds issued Deferred tax liabilities Total non-current liabilities Current liabilities Interest-bearing loans and borrowings Bonds issued Trade and other payables Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES Notes to financial statements on page 6 to 19 are integral part of these financial statements. 2

20 Condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) Statement of comprehensive income For the 6 month period ended Note 30 June June 2015 Gross rental income Property operating expenses Net rental and service related income Administrative expenses Other income Other expenses Results from operating activities Finance costs Net finance costs Profit before income tax Income tax expense Profit from continuing operations Profit for the period Other comprehensive income / (expense) for the period, net of tax Total comprehensive income for the period Profit attributable to owners Total comprehensive income attributable to owners Earnings per share Basic earnings per share (TCZK) Diluted earnings per share (TCZK) Notes to financial statements on page 6 to 19 are integral part of these financial statements. 3

21 Condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) Statement of cash flows Cash flows from operating activities For the 6 month period ended Note 30 June June 2015 Profit before income tax Adjusted by: Net finance costs Profit before tax after adjustments Changes in trade receivables Changes in liabilities Net cash from operating activities Cash flow from financing activities Repayments of loans and borrowings and long term payables Interest paid Net cash used in financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at the end of the year Notes to financial statements on page 6 to 19 are integral part of these financial statements. 4

22 Condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) Statement of changes in equity Share capital Other reserves Retained earnings Total equity Balance at 1 January Profit for the period Total other comprehensive income for the period Balance at 30 June Share capital Other reserves Retained earnings Total equity Balance at 1 January Profit for the period Total other comprehensive income for the period Balance at 30 June Notes to financial statements on page 6 to 19 are integral part of these financial statements. 5

23 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) Notes to the Financial Statements 1 General information CPI Alfa, a.s. (hereafter the Company ) is a joint-stock company incorporated under the laws of the Czech Republic. The Company was established on 21 March 2012 and was incorporated in the Commercial register kept by the Municipal Court in Prague. The registration number of the Company is The address of its registered office is Vladislavova 1390/17, Nové Město, Praha 1. Principal activities The Company rents and manages its investment property portfolio composed of retail parks. Shareholder The sole shareholder of the Company is Czech Property Investments, a.s. (hereafter CPI a.s. ) with its registered office - Vladislavova 1390/17, Praha 1, Czech Republic. The registration number of the sole shareholder is The Company is part of consolidated group of Czech Property Investments, a.s. (hereafter the Group ), which is controlled by CPI PROPERTY GROUP, located at 40, rue de la Vallée, L-2661 Luxembourg, Grand-Duchy of Luxembourg. The CPI a.s.`s share is fully pledged as a security for issued bonds (note 3.6) Management as at 30 June 2016 Board of Directors Supervisory Board Members Members Zdeněk Havelka, since 21 March 2012 Milan Trněný, since 28 January 2014 Martin Němeček, since 25 September 2012 as at 31 December 2015 Board of Directors Supervisory Board Members Members Zdeněk Havelka, since 21 March 2012 Milan Trněný, since 28 January 2014 Martin Němeček, since 25 September 2012 Employees The Company has no employees as at 30 June 2016 (as at 31 December 2015 no employees). 6

24 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) 2 Significant accounting policies The accounting policies applied in preparing these condensed interim financial statements are consistent with those used to prepare the financial statements for the year ended 31 December Basis of preparation The condensed interim financial statements for the six month period ended 30 June 2016 have been prepared in accordance with IAS 34, Interim Financial Reporting. The condensed interim financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company s annual financial statements as at 31 December The condensed interim financial statements are presented in thousands of Czech crowns and all values are rounded to the nearest thousand except when otherwise indicated. The Company s objectives and policies for managing capital, credit risk and liquidity risk were the same as those that applied to the financial statements for the year ended 31 December The Company s operations are not any subject to seasonal fluctuations. These condensed interim financial statements have not been audited. The condensed interim financial statements were authorized for the issue by the Board of Directors on 29 September New accounting standards and amendments For the preparation of these condensed consolidated interim financial statements, the following new or amended standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2016 (the list does not include new or amended standards and interpretations that affect first-time adopters of IFRS or notfor-profit and public sector entities since they are not relevant to the Company). The nature and the impact of each new standard/amendment are described below: IAS 1, 'Presentation of Financial Statements' includes the following five, narrow-focus amendments to the disclosure requirements contained in the standard. Materiality in IAS 1 has been amended to clarify that: o o o Immaterial information can detract from useful information. Materiality applies to the whole of the financial statements. Materiality applies to each disclosure requirement in an IFRS. The order of the notes (including the accounting policies) have been amended, to: o o Remove language from IAS 1 that has been interpreted as prescribing the order of notes to the financial statements. Clarify that entities have flexibility about where they disclose accounting policies in the financial statements. These amendments to IAS 1 are effective for annual periods beginning on or after 1 January Early application is permitted. The above mentioned amendment of IAS 1 has no impact on the financial statements of the Company as at 30 June IAS 16, Property, Plant and Equipment and IAS 38, Intangible Assets faceare amended as follows: 7

25 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) o o Revenue-based depreciation banned for property, plant and equipment means that revenue-based methods of depreciation cannot be used for property, plant and equipment. New restrictive test for intangible assets deals with a rebuttable presumption that the use of revenue-based amortisation methods for intangible assets is inappropriate. This presumption can be overcome only when revenue and the consumption of the economic benefits of the intangible asset are highly correlated, or when the intangible asset is expressed as a measure of revenue. These amendments to IAS 16, respectively to IAS 38 are effective for annual periods beginning on or after 1 January These amendments do not have any impact on the Company s operations. IAS 16, 'Property, Plant and Equipment' and IAS 41, Agriculture related amendments say that bearer plants being in the scope of IAS 16 instead of IAS 41, to reflect the fact that their operation is similar to that of manufacturing. These amendments to IAS 16, respectively to IAS 41 are effective for annual periods beginning on or after 1 January These amendments do not have any impact on the Company s operations. New standards and interpretations not yet adopted The following new standards, new interpretations and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2016 and have not been early adopted by the Company: IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the hedged ratio to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January Early adoption is permitted, subject to EU endorsement. It is very likely to affect the Group s accounting treatment of financial instruments. The Company is yet to assess IFRS 9 s full impact. IFRS 15, 'Revenue from contracts with customers' deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. Revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted, subject to EU adoption. The Company is assessing the impact of IFRS 15. 8

26 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) IAS 12 'Income Taxes' amendments deal with the clarification of accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value. The entities would have to consider wheather the tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. The amendment is effective for annual periods beginning on or after 1 January IFRS 16, 'Leases' effective for reporting periods ending 31 December 2019 (early application is permitted), will replace the actual IAS 17 Leases. Under IFRS 16, companies will recognise new assets and liabilities, bringing added transparency to the balance sheet. IFRS 16 eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. There will be a single, on-balance model for both finace and operating leases. The Company is currently assessing the impact of IFRS 16. The Company has estimated the impact of the implementation of the other new standards and amendments not early adopted as non-significant. The Company refers to the endorsement status of the new IFRS standards and amendments to standards and interpretations as they are published by the European Union ( 2.3 Estimates The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience, internal calculations and various other factors that the management believes to be reasonable under the circumstances, the results of which form the basis of judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results may differ from these estimates. In preparing these condensed interim financial statements, the significant judgements made by management in applying the Company s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended 31 December

27 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) 3 Statement of financial position 3.1 Investment property 2016 Retail Total Balance at 1 January Balance at 30 June Retail Total Balance at 1 January Additions Valuation gain Balance at 31 December Investment property represents retail portfolio in Dobříš, Holešov, Holice, Rýnovice u Jablonce nad Nisou, Liberec, Říčany, Semily, Tanvald and Turnov. Investment property portfolio was purchased in October 2012 with current tenants (note 4.1). All investment property is pledged as a security for issued bonds. Investment properties at an aggregate value of TCZK (31 December 2015 TCZK 3 866) are held under long term finance lease arrangements, which expire in For liabilities related to lease investment properties refer to note 3.5. Fair value of Investment property Retail portfolio value was not updated by any external valuator as at 30 June The management of the Company analysed current situation on retail market together with current yields, discount rates applied and other inputs used in Income capitalization method of valuation. Fair value of retail properties was determined based on management s analysis described above and does not significantly differ from fair value as at 31 December Trade and other receivables Current 30 June December 2015 Trade receivables due from related parties (note 7.1) Trade receivables due from third parties Prepaid expenses Total current trade and other receivables

28 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) 3.3 Cash and cash equivalents 30 June December 2015 Bank balances Cash on hand Total cash and cash equivalents The Company has no restricted cash as at 30 June 2016 and 31 December Equity Changes in equity The statement of changes in equity is presented on the face of the financial statements. Share capital Share capital of the Company consists of 20 pcs of shares (as at 31 December shares), each with a nominal value of TCZK 100 each (31 December TCZK 100). Share capital as at 30 June 2016 was TCZK (31 December TCZK 2 000). All shares are the same type (ordinary registered shares) and fully paid-up. Other reserves Other reserves consist of owners contribution of TCZK (as at 31 December 2015 TCZK ). Earnings per share 30 June June 2015 Net profit attributable to ordinary shareholders for the 6 months period ended Earnings per share - basic Earnings per share - diluted Interest bearing loans and borrowings Non-current 30 June December 2015 Loans from related parties (1) Finance lease liabilities Total non-current interest bearing loans and borrowings Current 30 June December 2015 Loans from related parties (1) Finance lease liabilities Total current interest bearing loans and borrowings

29 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) (1) The loan has been provided by the parent company CPI a.s. and bears fixed interest of 10 % p.a. The current part of a loan TCZK (31 December TCZK 5 094) represents unpaid interests only. The principal amount of the loan TCZK (31 December TCZK ) is due on 31 December Bonds issued 30 June December 2015 No. of bonds issued Value No. of bonds issued Value Non-current Proceeds from issued bonds - CPI Alfa, a.s. (1) Less: transaction cost Total non-current Current Accrued interest on bonds - CPI Alfa, a.s Total current Total bonds issued (1) CPI Alfa bonds were issued on 26 October 2012 and mature on 26 October The nominal value of each bond is CZK 1. The Company could issue bonds up to maximum value of TCZK Bonds were issued as bearer notes in listed form (registered in the Central Securities Depository, ISIN CZ ). The prospectus was approved by the decision of the Czech National Bank on 22 October 2012, reference number 2012/10125/570 effective on 22 October Bonds were accepted for trading at the Prague Stock Exchange. Bonds CPI Alfa bear the fix interest rate 5,5 % p.a. Interests are due quarterly, on 26 January, on 26 April, on 26 July, and on 26 October respectively. Collateral In order to secure the obligations arising from bonds issued the Company or its parent company respectively pledged following assets as collateral: investment property; shares in CPI Alfa, a.s. Any liabilities arising from issued bonds are guaranteed by CPI a.s., the sole shareholder of CPI Alfa, a.s. Covenants Issued bonds are subject to a number of covenants. In accordance with the prospectus the covenant ratios are calculated on annual basis therefore their compliance will be calculated for the year ending 31 December

30 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) 3.7 Trade and other payables Current 30 June December 2015 Trade payables due to related parties (note 7.1) Trade payables due to third parties Advances received Value added tax payables Total current trade and other payables

31 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) 4 Statement of comprehensive income 4.1 Gross rental income For the six months ended 30 June June 2015 Total gross rental income Gross rental income includes income from rental of 9 supermarkets. These supermarkets are leased to Billa and Penny Market retail chains. Rental contracts are concluded until No service charges are invoiced to tenants. 4.2 Property operating expenses For the six months ended 30 June June 2015 Repairs and maintenance Facility management Real estate tax Property insurance expenses Other property related expenses Total property operating expenses Administrative expenses For the six months ended 30 June June 2015 Services provided based on mandate contracts (1) Rental expenses Audit, tax and advisory services Other administrative expenses Total administrative expenses (1) From 2015 services provided based on mandate contracts are provide by related party CPI Services, a.s., part of CPI Group (see Note 7). 14

32 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) 4.4 Other income For the six months ended 30 June June 2015 Insurance claims Total other income Finance costs For the six months ended 30 June June 2015 Interest expense related to non-bank loans (1) Interest expense on bonds issued (2) Net foreign Exchange loss -1-1 Total finance expenses (1) Interest expense related to loans from related parties represents interest on loan provided by the parent company CPI a.s. (further details are described in note 3.5). (2) Interest expense on bonds issued represents interest payments to bondholders (TCZK 7 758) and amortization of transaction costs (TCZK 945). 4.6 Taxation For the six months ended 30 June June 2015 Current income tax expense Deferred income tax expense Income tax expense recognised in profit or loss Tax expense for the six month period ended 30 June 2016 is recognized based on management s best estimate of the effective tax rate for full financial year The Company s effective tax rate in respect of continuing operations for the six months ended 30 June 2016 was 19% (six months ended 30 June 2015: 22,39%). 15

33 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) 5 Financial risk management 5.1 Fair values Categories of financial instruments Financial assets of the Company comprise trade and other receivables and cash and cash equivalents, which are all classified as receivables. Financial liabilities of the Company comprise interest bearing loans and borrowings, bonds issued and trade and other payables, which are classified as other financial liabilities. The following table analyses within the fair value hierarchy the Company s liabilities not measured at fair value at 30 June 2016 but for which fair value is disclosed. Fair value hierarchy (Level) Carrying amount Fair value 30 June December June December 2015 Financial liabilities Interest bearing loans and borrowings Level Bonds issued Level Trade and other payables The fair values of the financial assets and financial liabilities included in the level 3 category above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties. 6 Contingent assets and liabilities 6.1 Contingent assets Management of the Company is not aware of existence of any contingent assets as at 30 June Contingent liabilities The Company does not keep in evidence any contingent liabilities. No legal proceeding is active the result of which would influence financial statements of the Company and the Company also is not of about any potential law-suits. 16

34 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) 7 Related parties The Company has a related party relationship with its members of Board of Directors and shareholder and companies in which these parties hold controlling or significant influence or are joint ventures. 7.1 Related party transactions Breakdown of balances between the Company and related parties is as follows: Trade receivables 30 June December 2015 Czech Property Investments, a.s Total other advances paid to related parties Current payables 30 June December 2015 Czech Property Investments, a.s CPI Services, a.s Total other advances paid to related parties Loans from related parties as at 30 June 2016 < 1 year 2-5 years Total Czech Property Investments, a.s Total loans from related parties December 2015 < 1 year 2-5 years Total Czech Property Investments, a.s Total loans from related parties During the six months period, the Company has entered into the following transactions with related parties: Purchases For the six months ended 30 June June 2015 CPI Services, a.s Total purchases related to related parties

35 Notes to the condensed interim financial statements for the six months ended 30 June 2016 in thousand Czech crowns (TCZK) Interest expense For the six months ended 30 June June 2015 Czech Property Investments, a.s Total interest expense related to related parties Interest expense includes interest on interest-bearing loans (note 3.5). 8 Capital commitments The Company has no capital commitments as at 30 June 2016 (as at 31 December 2015 no capital commitments). 9 Subsequent events No significant events occurred between the balance sheet date and the date of preparation of the Company s financial statements. Prague, 29 September 2016 Zdeněk Havelka Member of the Board of Directors CPI Alfa, a.s. 18